Beverage distributors call bottle-deposit law prone to fraud

SOUTH PORTLAND – Members of Maine’s beverage industry cited indictments handed down in York County this week to suggest the current bottle-deposit law is prone to costly fraud and inefficient as a recycling tool.

A York County grand jury Thursday indicted Thomas and Megan Woodard of Green Bee Redemption in Kittery on charges of stealing more than $10,000 by collecting deposits and fees on out-of-state bottles and cans as if they were purchased in Maine with the five-cent deposit. A Gloucester, Mass., lobsterman, Peter Prybot, was indicted for allegedly stealing a lesser amount.

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Newell Augur, executive director of the Maine Beverage Association, outlines the problem beverage distributors face with fraud at a news conference Friday at Coca-Cola's facility in South Portland. The problem was highlighted by the indictment of three people this week. David Hench/Staff Writer

“Unfortunately, Maine’s returnable container law is very susceptible to this kind of fraud,” Bob Bates, state director for Pepsi Beverages Co. in Auburn, said at a news conference Friday. “People may think we’re just talking about nickels and dimes here, but the cost of this illegal activity to bottlers and distributors runs into the millions of dollars each year — a cost that ultimately gets passed on to the consumers.”

Supporters of the state’s deposit law say it is important to address fraud, but also important to avoid using that as an excuse to weaken an effective program.

The recycling rate for containers in non-deposit states averages 24 percent compared with 70 percent in deposit states, said Susan Collins, executive director of the California-based Container Recycling Institute. “The performance of deposit programs is unmatched,” she said.

Maine has among the broadest returnable laws, covering water and juice containers as well as beer and soft-drink bottles and cans. The state estimates about 1 billion deposit containers are sold each year in Maine, and the state return rate is 90 percent.

But the beverage industry suspects that not all of those returnables come from Maine. As much as 10 percent might come from New Hampshire, which has no bottle bill; or Massachusetts, which covers only carbonated beverages, the industry says.

That would suggest that 90 million containers might be smuggled into the state each year, and returned at unscrupulous redemption centers that mix them in with legitimate recyclables, Newell Augur, executive director of the Maine Beverage Association, said at a news conference Friday at Coca Cola’s facility in South Portland.

Companies such as Coca Cola, Pepsi and National Distributors, which sells Budweiser and other beers in Maine, pay redemption centers for the containers they collect from consumers. For each container, the companies pay the 5-cent deposit — 15 cents for wine and hard-liquor containers — plus a processing fee of 3.5 to 4 cents.

The companies also have to pay for the trucks and drivers collecting the containers and processing them for bulk sale. Recycled aluminum cans are worth about two cents each when sold in bulk as raw material.

Fraud could add as much as $7.75 million to the cost of handling returnables, Augur said, but the companies can’t be sure, because it would be far too costly to inspect each container. The companies collect truckloads each day.

The industry can conduct spot checks at redemption centers and vendors to determine whether a sample contains any containers that shouldn’t be there, but they generally depend on the redemption centers to check incoming bottles and cans for the Maine deposit symbol.

Even that isn’t foolproof — many cans sold in no-deposit New Hampshire have the Maine deposit symbol.

It is expensive to print separate containers and store stock in separate warehouses, the industry says.

That’s why the prosecution of the Woodards and Prybot is so important to the industry.

“We hope the indictment and prosecution of these individuals sends a strong message that the state of Maine takes this crime seriously,” Dave Dumont, director of operations for Coca Cola Maine, said at the South Portland news conference.

Augur said the association does not favor repeal of the bottle bill, but supports legislation to study it for possible changes. The industry would favor a system that has deposit bottles and cans returned to the municipal recycling stream where they could support a more robust recycling program. Aluminum and PET plastic bottles are the most valuable components of the recycling stream, so removing them deprives municipal programs of a major commodity that could help support the recycling of other products, Dumont said.

Collins, of the Container Recycling Institute, said only about half of all beverages are purchased for home use, so even successful curbside recycling programs don’t collect beverages bought at restaurants or workplaces.

Craig Thorne, who runs Pack Man’s redemption in Windham, says the industry could do more on its own to fight fraud. The industry should not sell cans that bear Maine’s returnable symbol in other states.

That’s just asking for them to be brought back to Maine for redemption, he said. He complimented Poland Spring, which now places a red stripe on bottles for sale outside the state.

Another part of the problem is education, Thorne said. A lot of people believe any returnable can or bottle has a five-cent deposit value in Maine, no matter where it was purchased, he said. They don’t realize that value exists only if it was purchased in Maine.

Augur said previous analyses have suggested that about half the deposit fraud is intentional, half incidental.

The association wants a change in the law so a civil action could be filed against anyone trying to redeem 48 or more containers not purchased in Maine.

“We appreciate the state’s response to this crime, but given Maine’s limited resources and many other priorities, we feel that now may be a good time to strengthen the existing law, and also explore alternatives,” Augur said.

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